We discuss some of the questions you can ask yourself to determine your financial health, from planning for the future to taking control of your money.
There’s no single, definitive way to measure your financial health. There could be high-income households that are financially unhealthy, and low-income households that are the epitome of financial responsibility and health. Equally, you could be debt-free but living from one pay cheque to the next, or have plenty of debt but have it for all the right reasons.
In this article, we’re going to discuss some of the questions you can ask yourself to help you determine your financial health.
1. Are you in control of your money or is your money in control of you?
If you’re in control of your money, you will budget for your living expenses, track your spending, have a plan in place for your debt repayments and monitor your savings and investments. If your money is in control of you, you’ll go from one day to the next not knowing where your money is coming from and how much is going out.
Whether you use paper and pencil or a series of complex spreadsheets is not important, what matters is that you have a working system that allows you to understand your finances, plan for the future and make decisions based on the facts. Instant loan provider Wonga recently produced a ‘Financial Readiness Pack’ that we recommend checking out here as an excellent starting point to help you regain control.
2. You focus on the future
When it comes to your finances, taking one day at a time is not a healthy approach. To make the most of your income, you need to focus on the future and work towards achievable goals. For example, if you have high-interest credit card debts, your priority should be to pay that off before you do anything else.
Writing down your goals can help you visualise them and remind yourself why you’re taking the steps that you are. Signs that you’re focused on the future include:
- Creating an emergency fund (more on this here)
- Setting achievable short-term and long-term financial goals
- Learning more about saving and investing
- Putting plans in place for your retirement
3. You never stop learning
You don’t have to be a financial expert to be financially healthy, but it does help if you’re open and committed to learning new things. There are more resources out there today than there have ever been before, and most of them are free! There are financial podcasts you can listen to, blogs you can read and websites that make it easy to invest your money in regulated financial products and enjoy healthy returns.
4. You’ve moved on from previous financial mistakes
Unfortunately, there’s no quick road to financial redemption. If you spend recklessly on credit cards when you’re young, you can’t just wipe the slate clean and start again, you will need to pay it off. The most important thing to do is to learn from those experiences and not to repeat them. We all make financial mistakes at one time or another, but being able to recognise them for what they are, forgive yourself and move on is the primary cornerstone of financial health.
What steps have you taken to improve your financial health? Please share your experiences with our readers in the comments below.